Is There a Real Estate Bubble?

In some areas of the country, as the local economy cools, local unemployment and inflation rises causing homes to become less affordable which leads to an extreme oversupply of homes and prices to drop as sellers become increasingly desperate to sell their homes.
In the Minneapolis-St.Paul area, the unemployment rate is at a very healthy level (less than 4% last time we checked). The challenge to the current market situation is the relatively high housing supply - 39,000 homes, up from the 29,000 level of one year ago.
Homes are selling, just not with multiple offers or in less than one week as they were just two to three years ago. The market has returned to what economists are calling a healthy three to six month time on market.
In summary, the housing market has entered into a healthy and balanced situation that doesn't overly favor either buyers or sellers. The 10% appreciation we have experienced in the past 5-10 years is now expected to be closer to 4%, still a healthy rate of return on your investment, and don't forget the tax advantages of home-ownership.

What this means to you as a seller: Stand out from the six homes each buyer has to choose from (for every home that sells each month, there are 5.18 homes that don't). To do this, your home needs to be properly prepared, accurately priced, and agressively marketed.
What this means to you as a buyer: Know your market. Know what homes are selling for in your area of interest. Know what a home should sell for. Armed with this information, you can prepare an offer independent of the asking price and feel comfortable that you purchased the home at a reasonable price.
With all this said, homes are selling, there are deals to be found, and to your advantage, interest rates are still at historically very low levels.
Tune in next Wednesday for more information on real estate and housing in the Twin Cities area.